Porto Alegre, April 30, 2024 – The central focus in the international market is now centered on the 2024 US crop. With a cut in the area to be planted, attention will be focused on any climate change over the next 120 days. Also, on the 8th, the Department of Agriculture will release its first estimate for the 2024/25 local supply and demand, which tends to be neutral for corn and very bearish for soybeans. At the same time, information about pest losses in northern Argentina does not affect the global picture, especially because the other producing regions have record productivity. Greater attention, once again, to the Black Sea due to the movement of wheat from Ukraine amid the intensification of the war.
The 2023 crop in the United States showed a very strong initial pace but ended up being concluded only on June 4, slightly beyond the deadline. The rain in May delayed the progress of work last year. Additionally, the two largest producers in the Midwest, Illinois and Iowa, suffered from a hot summer and droughts in July and August. The result, however, was a record yield of 177.4 bushels/acre despite the inclement weather. Just like every year, however, the market tries to increase the crop failure numbers, currently not even satellite information can properly capture the reality of production. Thus, the reliable data on the US crop continues to be from USDA.
The appeal of price volatility on the CBOT has always been preponderant between May and September, a period known as the “weather market,” which defines the production of the world’s largest corn producer. In 2024, of course, this movement will be repeated, with information sources projecting sharp losses in case of any symptom of problematic weather or projecting super productivity in the case of normal weather. During this period this is the information that will be valid for international prices, without any “new fact” involving extra-market indicators, such as wars and conflicts.
In this environment, the 2024 US planting begins at the same good pace as in 2023, with 12% of the cultivated area complete and good initial percentages in sections of Iowa and Missouri. If this pace persists, we should see planting close to 25% this week. Technically, the optimal pace would be confirmed with 50 to 60% of the area cultivated by the week of May 10. This week will have plenty of rain in some regions of the Plains and southern Midwest. Sharply rising temperatures. We do not see serious problems for the smooth progress of planting at the end of April and also during the month of May when considering the climate projections for the period. Of course, planting at a good pace will be accompanied by initial estimates of high productivity for this 2024 crop.
On May 8, USDA will update its supply and demand data for the current 23/24 business year and release the first projection for the 24/25 business year. In the current framework, 23/24, the adjustment can be made using export data. Weekly sales in the business year have reached 46 mln tons until last week. The projection for the year is 53.3 mln tons. The issue is that the US has been selling 500 thousand tons to 1 mln tons a week, and there are still 17 weeks until the end of the business year in August. If this pace continues, there is a need to raise the projection for the year and consequently cut ending stocks. This could be an indicator, perhaps the only one, of support for corn prices until September for the old crop, 2023.
The picture for 24/25, however, should start from the intention of planting 90 mln acres and high initial productivity, close to 182 bushels/acre. A crop of 379/380 mln tons, which allows for 24/25 stocks at the same current levels, 53 mln tons, even with an increase in domestic demand and exports. Therefore, the May picture should be relatively bullish for old-crop contracts but neutral for the new crop. What really brings a certain balance is that current stocks are quite high and sufficient to absorb slightly larger exports until the end of the business year.
Now, US sales will continue to compete with Argentine corn and Brazil’s resumption of exports with the early arrival of its second crop. Could this hold back US sales? Perhaps, as long as Brazil adjusts its prices to external competitive levels.
Argentina continues with the discussion about the size of the pest-induced losses in the north of the country. In fact, the northern region of Cordoba toward the border with Paraguay was the region affected by the plague, already well known in Brazil. Argentine growers did not apply the appropriate insecticides for control, and the result was effectively a loss. Now, things depend on the harvest and average yield, in a region without strong corn production. The strong region is the south of Cordoba, Buenos Aires, Santa Fé, and Entre Rios. In such locations the reported productivity is high by local standards and compensates for part of the losses in the north.
The premature corn harvest continues to advance, reaching close to 20%, maintaining a lag against the average of around 6 points. The rain has been complicating the harvest logistics, and insects are common in some areas due to high moisture. Moisture forces producers to send the harvest for drying and not directly to the port. The national production estimate is falling by 2.6 mln tons from 53.6 to 51.05 mln tons. Both the increase in lost area and the decrease in productivity stand out. Late plantings are generally the most complicated, while in the central zone, the final harvest stage of early plantings begins. New information that we have collected from the market forces us to update the production estimate. The current season has been very difficult to estimate. The pest-induced damage forces the production number to be corrected. However, it must be clear that it is impossible to assess the damage in its entirety.
Late crops are the most affected, many of which still have a month to month and a half left in their cycle and are subject to new updates.
From the north of the agricultural region, there are reports of an increase in the lost area, with areas that will no longer be reaped, and in many cases the possibility of starting the harvest earlier due to the poor condition of the crop is beginning to be evaluated. In this situation, the province of Chaco and, to a lesser extent, Salta and Tucumán stand out. The province of Córdoba is a key province for corn production and stands out for its late cultivation. Also here the presence of pests affecting late corn is reported, but with very different situations depending on location, which makes its estimate very complicated. While in the south of Córdoba average yield could barely reach 5,000 kg/ha, in the Río Cuarto area, yields could hit 7,500 to 8,000 kg/ha but with a significant disparity between the regions. Further west, in the Villa Mercedes area, San Luís, there are cases of crops that will produce an average of 4,000 kg/ha. In the province of Buenos Aires, good yields are reported in the center of the province, with 10,000 kg/ha around 9 de Júlio, Junín, but they decline further west, in Trenque Lauquen, General Villegas, with more details needed for late plantings.
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